Non-Domestic Rating (Multipliers and Private Schools) Bill

Debate between Luke Evans and Damian Hinds

Report stage
Wednesday 15th January 2025 Commons Chamber

[Damian Hinds]

There are problems with all taxes, which is why we end up with a blend of taxes. For businesses, there is tax on payroll, sales, profits and property. However, business rates are a particularly difficult and unpopular tax because they represent a fixed cost on the business that does not vary when the economy goes up or down, or according to the particular company’s success or growth, or a contraction in its sales or profits.

Over the years, I have heard many times from businesses in Alton, Petersfield, Horndean, Clanfield, Liss and elsewhere in East Hampshire about a desire for business rates reform. I am sure that a lot of small business owners were very attracted to what they heard from the Labour party—that it would to scrap business rates altogether. The Labour Government do not say that any more, but they still want us to believe that they are undertaking some great reform and cutting rates for our high street businesses. I am afraid it is all smoke and mirrors, because for those businesses, including the ones name-checked by the hon. Member for Erewash (Adam Thompson), the big effect that they feel right now is the cut in the relief for retail and hospitality business—not a small one, but from 75% to 40%.

It would be bad enough if that was all businesses faced, but it is not. They have to cope with all sorts of difficulties the whole time. We have rising labour costs—we support the increase in the national living wage over time, but not a hike in employer national insurance contributions at the same time. Because of what is happening to the threshold, there will be a massive effect on part-time workers. That will be very difficult for retail and hospitality businesses to swallow.

In and of themselves, the cuts to the multiplier for high street businesses are welcome, but we must remember that they are balanced by increases elsewhere in the system. Sometimes, Government Members talk about big businesses and corporations as some unwelcome part of our economy, but they are the biggest employers in the country and are fundamental to our economy. In the Red Book, these changes involve increases of hundreds of millions of pounds in business rates. Who will the increased rates affect? They will affect large supermarkets—a sector that is one of the biggest employers in the country—and hotels, which are a really important employer, as well as being fundamental to travel and tourism. Will the Minister also say a word about the expected effect on the national health service?

The blurb on the Budget says, “We are going to attack distribution centres, including those used by online retailers.” The word “including” does a lot of work in that sentence, because high street retailers also have distribution centres, and the changes will add to their costs, fuelling inflation on food and everyday consumer goods.

[Dr Luke Evans]

My right hon. Friend is making an excellent observation on the impact of these costs. We know from the surveys that 75% of businesses will pass on the costs to the very people who use them. They will have an inflationary impact on the public. Does he agree that it is imperative that we think about that?

[Damian Hinds]

As ever, my hon. Friend is spot on. In the end, there is no such thing as a tax on business—you cannot tax a business; you can only tax people. Any tax on business is ultimately a tax on its employees, its customers or its owners. Before somebody jumps up and starts talking about the owners, the owners are often pension funds who are then paying out the pensions for our mums and dads.

My point is that these business rate increases will mean higher costs for bricks-and-mortar companies as well, which come on top of all the other changes, in particular the hike in employer national insurance contributions. And this from a Government who yet again this week keep talking about their growth agenda. It makes me wonder what is actually written in that growth agenda.

Overall, the effect of all these changes—we need only look at the Budget Red Book—is that the revenue from business rates is projected to increase from £32 billion this financial year to almost £40 billion in five years’ time. It is a massive further tax raid on business, and a brake on employment and economic growth.